Archives for May, 2007

One of the most common questions I am asked is “What does it cost to go bankrupt in Toronto?” It may surprise you to learn that the cost of bankruptcy is different in Toronto than it would be in other cities in Canada, even though the bankruptcy process is legislated by the federal government, and therefore the rules are the same for everyone in Canada.

There are four basic costs of bankruptcy.

First, in most cases there is a monthly payment you will make to the trustee each month to cover the administrative costs of the bankruptcy process, such as mailing costs, filing fees, and trustee’s fees.

For most trustees in Toronto the typical minimum payment would be in the range of $160 to $200 per month. Many trustees may also charge an up-front fee before they will begin work on your file. (At our firm, we typically don’t require an up front fee; you will make your first month’s payment when you sign your bankruptcy paperwork). A first bankruptcy can usually be completed in nine months; a second bankruptcy will take longer, so the number of months for which you will be making payments will depend on your circumstances.

Second, if your income is over the allowable limit, you are required to pay a portion of your surplus income. Each month during your bankruptcy you will send us copies of your pay stubs and proof of any other income you receive. We will then compute whether or not you are required to make an additional payment.

For example, a single person is allowed to earn $1,797 per month after taxes. Someone who earns $1,897 in a month is $100 over the limit, so they would be required to make an extra payment of half of that amount, or $50.

The surplus income limit ($1,797 for a single person in my example above) is the same all across Canada, and is based on what the federal government believes you require to live. This is often unfair to Toronto residents who face much higher living costs than people in other cities, but unfortunately that’s how the rules work. (That’s why a large number of Toronto residents with financial problems choose to file a consumer proposal in Toronto instead of bankruptcy). The surplus income limit changes each year, and is based on the size of your family and certain other factors, like medical expenses and child support payments, so I suggest you contact us to show you how the calculation would work in your situation.

Third, you will also lose your GST credits and tax refunds while you are bankrupt. When you meet with one of our professionals we will explain in more detail how taxes are impacted by bankruptcy.

Finally, you must surrender certain assets when you go bankrupt, including certain RRSPs, and valuable cars and houses. Again, these rules are complex, so we will explain them to you in more detail when we meet.

When you ask many trustees how much will my bankruptcy cost? they tell you about the monthly payment, but don’t explain about surplus income, GST and tax refunds, and assets you may lose. Be sure you understand the full costs before you file for bankruptcy, which is why we always explain the entire bankruptcy process in detail, and then let you decide whether or not personal bankruptcy in Toronto is the correct solution to your financial problems.

To find out how much it would cost for you to file bankruptcy, call our Toronto team at 310-PLAN (that’s 310-7526, no area code required) or E-mail us to arrange a free initial consultation. There is help available, so give us a call, and let’s get started.

I have $60,000 in debt, most of it from gambling. I can’t keep up with the payments and I’m starting to fall behind. I think I need to file for bankruptcy, but I was wondering – would a bankruptcy include my gambling debts?

This question came to me the other day and is a fairly common concern – if I’m in financial trouble because of gambling debts, will my bankruptcy cover them?

A gambling debt is no different than a credit card debt or a tax debt or a bank loan – it is an unsecured debt that can and will be discharged, or forgiven, by your bankruptcy. The only difference is if you file for bankruptcy with debts that were caused by gambling, you are not eligible for an automatic discharge as in other bankruptcies.

Essentially, a bankruptcy takes 9 months to complete. At the end of this time, a first-time bankrupt person will be released from their debts after 9 months automatically, unless there is a reason preventing this from happening. There are a few reasons for an automatic discharge not happening, like not paying your surplus income payments and not attending your required counselling sessions. Another reason is if your debts were caused by gambling.

Gambling debts are a two-sided problem – on the one hand they are financial burden that you can no longer afford to maintain and need to deal with, and on the other hand they were caused by a behavioural problem that needs to be solved.

When you file for bankruptcy for your gambling debts, the law looks at both sides of the situation. You are able to get rid of your debts by filing for bankruptcy if you also work to rehabilitate yourself from your gambling problem.

At the end of your 9-month bankruptcy, you will be required to appear in court in order to determine if you have made progress in fixing your gambling problem. They want to know if you’ve been enrolled in counselling programs to handle your gambling addiction and if you have done things voluntarily, like self-excluding yourself from casinos, where you ask to be banned from the casino and if you do appear they have permission to arrest you.

If you appear before the court and you haven’t taken any steps to help your gambling problem, you may not get an absolute discharge, where your debts are forgiven, but rather you might have to be bankrupt for longer. The court needs to know that you are serious about fixing both of the problems – the financial situation and your gambling addiction.
The real key to this situation is to try and find an alternative to filing for bankruptcy;  a consumer proposal may allow the debts to be compromised while avoiding an attendance before the courts.

If you’re struggling with a gambling problem and overwhelming gambling debts, contact me for a free consultation. You can also email me any questions you might have. Don’t be embarrassed by your problem – let’s talk about it. I can help you figure out a plan to deal with your debts and even help you find an agency that can help you deal with your gambling problem. Contact me today.

Every person will experience financial trouble at some point in their lives. Whether it is caused by job loss, divorce, sickness, or poor decision making, money and debt problems cause stress and strain and can be tough to fix on your own.

Some people can get out of the trouble they are in – they take extra shifts at work, cut back on expenses, or get help from a relative or a friend. Others, though, have situations that are so overwhelming that they need help in order to fix the situation they are in. This is where Hoyes, Michalos & Associates Inc. comes in.

We start with a meeting that is a free consultation to sit down with you and discuss your financial situation. The meeting lasts for approximately one hour, in which we will work through your financial problems, and find the right solution for you and your family. To get the most out of this meeting, you should bring in as much of the following as you can:

- List of creditors, or people you owe money to – this should include everyone, including credit cards, banks, pay day loans, family members, friends, etc.

- Statements – this includes credit card statements, loan statements, etc. 

- Budget for the month – this includes how much money you make and how much money you spend in a month

- Most current pay stubs 

- And any Information about what you own – this includes information about your house, your car, any RRSPs, etc.

The meeting will help you see your whole financial situation more clearly, and will provide possible solutions including filing a consumer proposal or personal bankruptcy. In most cases you’ll walk away feeling more relieved because you have a plan for dealing with your debts and can start to put your life back together.

If you are in financial trouble and you want to talk to someone, contact us at 310-PLAN or email me any questions you may have. The meeting we’ll set up is completely free of charge and will help you figure out your next step. Remember – bringing as much information as possible will make your meeting more successful. For a complete list of items to bring and information to consider, check out our Fresh Start Application, which you can fill out before you come speak to us.

Don’t hesitate – if your debt problems are overwhelming you, let’s get together to figure out your next step and get you your fresh start today.

Recently, I helped a couple who had moved to Florida from Ontario and were having trouble dealing with their debts. Their debts were all Canadian, meaning they had all been incurred in Canada from Canadian creditors.

They asked me if it were possible to deal with their debts from Florida, where they retired to, with Canadian solutions.
Legally, it is possible to deal with Canadian debts while outside the country, but it is more difficult than if you were living in Canada.

By law, a trustee must conduct an assessment of an individual, usually done in person. If the person is out of the country, then it is more difficult, as it has to be completed over the phone or by correspondence.

After the assessment, a set of documents must be signed and sworn. This becomes more difficult if the person is living in Florida. In the case of the couple above, the documents had to be sworn locally by an attorney (or it could have been done at a Canadian embassy).

During your bankruptcy, you must attend two counselling sessions to help you deal with your money management trouble. If you’re not in Canada, these counselling sessions are more complicated to arrange. The couple who had retired to Florida decided to do their counselling sessions by video conference using the internet (i.e. using a software program like Skype).

And if a bankruptcy requires a meeting with your creditors, you have to attend, regardless of where you are living in the world. Although the meetings are rare, it is the duty of the bankrupt to be there.

Although the law protects the rights of creditors, trustees, and you, the bankrupt, the law can’t reach beyond the border. If you live in Ontario and you file for an Ontario bankruptcy, you are allowed to keep certain assets. If you live outside of Ontario, you won’t be covered under these laws, and some of your assets, which would be exempt if you were living in Ontario, won’t necessarily be exempt. You may have to give up assets that you would otherwise be allowed to keep (for example, a basic vehicle).

Filing for a Canadian bankruptcy is easier if you live in Canada, but is not impossible if you don’t. If you have debts you would like to deal with, contact me for a free consultation. You can also email me any questions you might have. Don’t let your debts prevent you from living a hassle free life – let’s figure out a plan to get you back on track.

It’s enough to make anyone’s heart stop – you get your paycheque, and you find that not only is the government taxing your income, but now your credit card company is taking a chunk through wage garnishment.  This can be an awful surprise, considering that the garnishments are generally 20% to 30% of your take home pay, an unexpected expense for your already tight budget.

Your first thought is, how can they do that?

Wage garnishment is legal action against you by your creditors to get the money you owe them.  It is legally binding for you and your employer to comply with the court order that justifies this legal action.

Essentially, your creditor has to file paperwork with the court in order to take action against you to recoup the money you owe them, which would be through wage garnishment. If the court agrees to this action, the court will then inform your employer to start deducting money from your paycheque.

If your wages are being garnished by Revenue Canada, no paperwork has to be filed with the court – they have the power to speak directly to your employer to start the garnishment. This is called a Requirement to Pay and this type of wage garnishment can be as high as 50% to 100% or your wages.

Last week a man came in with this exact situation – he received his paycheque and noticed the new deductions off of his pay. He was confused because no one told him about the garnishments and was upset because he couldn’t afford these deductions. He wanted to know how to stop this from happening.

There are three ways to stop a wage garnishment – pay the deductions until they stop, or file a consumer proposal or for personal bankruptcy. Because proposals and bankruptcies are both legal processes, either will stop any wage garnishments.

A wage garnishment takes your debt situation out of your control and places it in the control of the courts and your creditors. To take back your situation, consider filing for either a consumer proposal or bankruptcy. With these solutions you can take control over your situation and begin to look forward to your healthy financial future.

For more information about wage garnishments or ways to stop them, contact me at 310-PLAN. You can also email me any questions you might have. Take control of your situation and get the peace of mind and fresh start that you deserve.
 

Surplus income is the amount of money required to be paid by you to your creditors every month that you are bankrupt.
You might be wondering how someone who is going bankrupt can afford to pay anything to their creditors. This is exactly what a single mother I was working with last week thought – how can I pay more money when I already can’t pay what I owe now?

The woman I was dealing with had 2 children and was recovering from an illness that had made it hard for her to work regularly. She had $25,000 in debt from her credit cards and a bank loan. She wasn’t making enough money to make a deal with her creditors in a consumer proposal, so she was filing for bankruptcy, as that was the solution that fit her situation the best.

Already upset by the fact she was filing for bankruptcy, she felt overwhelmed by the thought of making monthly payments to her creditors. I was able to answer her questions about surplus income and thankfully put her fears to rest. 
I explained to her that surplus income is not an arbitrary number – surplus income payments are calculated by federal law, and are based on how much family income there is in her household, and how many people live in her household.

For any money that a person makes above the guideline set by the federal government, depending on how many people live in the household, they are required to pay a percentage of that to their trustees, who will in turn send it to their creditors. This amount over the guideline is surplus income.

And because surplus income is governed by federal law, the amount required from each bankrupt is non-negotiable – even a trustee can’t waive surplus income payments. This means, if she missed any payments, she will owe the money at the end of her bankruptcy, won’t receive her discharge, and will remain bankrupt until she has made all of her surplus income payments.

I also reminded her that filing for bankruptcy would take care of her credit card and loan payments, which would free up more of her money so that she would be able to handle the surplus income payments.

Bankruptcy can be an overwhelming process, but in the end it gives you the fresh start you need to enjoy your financial future. For more information about this or any other aspects of bankruptcy, contact me at 310-PLAN for a free consultation. You can also email me any questions you might have about bankruptcy or bankruptcy alternatives. Don’t wait for your bright financial future to find you – enjoy yours today.